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I was overjoyed to see a recent piece in Procurement Leaders that said if you think education is expensive, try ignorance. Because, in spend management, where most professionals don’t have at least a decade of experience in every category they have to manage (and often don’t have all the tools and technologies they should have to help them), a lack of training ultimately results in a lack of critical skills and best practices that end up costing many large organizations millions of dollars annually. This is because the potential cost reductions are just left on the table by procurement professionals who didn’t have the skills to identify and negotiate them.
Furthermore, with many courses, and even certifications, available today for just a few thousand dollars, not providing your staff with training at least semi-annually is just ridiculous. (See the training and on-demand resource guides on the resource site for some examples.) Not only is the cost less than 10% of your average salary for a mid-to-high end procurement professional, but it’s less than 1% of the savings that person can generate off of one high-end procurement alone. If it helps them shave another 200K, or more, off a multi-million dollar procurement … it’s paid for itself twenty to one hundred times over. That’s a greater ROI than even industry leading spend analysis and decision optimization can deliver. (Furthermore, only trained professionals can maximize the ROI from these tools.)
So train your people TODAY. And maybe, just maybe, this recession will be the best thing that ever happened to you as your skilled and educated staff helps your organization blow your competition away.
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Last December, the McKinsey Quarterly published an article on Strategy in a ‘structural break’ that is even more appropriate now than it was then as the structural break, at least according to some, shows no sign of ending this year. The article, which started off noting that a structural break in the economy is an opportunity in disguise, made a good point … you need a strategy … a real strategy … a cohesive response to the challenge … to survive. This is especially true when the old ways no longer work and you have to change … and chances are, for the majority of companies out there, this is the case.
So what can you do? You definitely have to avoid the phenomenon by which process engenders further process, eventually becoming a self-sustaining buzz and reduce the complexity of corporate structures and transform your business models. You have to simplify and simplify again. Then provide lean central and support services that don’t require business units to spend time and energy coordinating their activities.
So what does this mean for your supply chain? What is your strategy for the structural break?
While it’s hard to say, as each company will need it’s own, unique, targeted strategy to survive, I can tell you this. You need to:
- adopt a center-led strategy
that allows you to use the best of center-led and distributed models and uses collaboration software to share best practices and knowledge throughout the organization in an easily searchable and retrievable anywhere, anytime model
- adopt a dynamic real-time push-pull demand chain model
it’s a volatile market, and old methods of forecasting, pull-only, and push-only don’t cut it anymore … you have to adapt in real time, pull when you sense a sharp uptake, and have your manufacturer push when they can predict uptakes ahead of you and create optimal production runs
- organize around the “networked person“, not the organization man
if you’re not on the move, you’re standing still and … in this economy … if you’re standing still, you’re being pushed off the cliff with the rest of the lemmings
- implement SaaS or cloud e-sourcing and e-procurement technology
make sure your entire team can use the applications anytime, anywhere to do their jobs and get what they need, when they need it, at the best value point
- if you don’t have it, get optimization software …
and if you have it, use it
figure out where you’re spending the bulk of your money (by way of a good spend analysis if need be), and get the right optimization software for your needs: if it’s goods or services, get strategic sourcing decision optimization software; if it’s transportation get transportation and network optimization software; if it’s manufacturing and production, get production optimization software … applied against the right problem, you can expect a 10X return … or more … for your investment … if not more!
- use more consultants
but target them on near-term and mid-term ROI initiatives until you get your cash flow optimized, then go back to the long term planning